Market Summary

Yield Movements

Local currency (LCY) government bond yields in the Republic of Korea rose an average of 19 basis points for all tenors between 1 September and 31 October as the Bank of Korea left the base rate unchanged in its last three meetings. On 23 October, the Bank of Korea maintained the base rate at 2.50%, as it deemed growth and inflation to be stable. The central bank said it would continue to monitor the possible impacts on financial stability of developments in the housing market and foreign exchange volatility brought about by trade negotiations with the United States.

Local Currency Bond Market Size and Issuance

The Republic of Korea's LCY bond market expanded 2.3% quarter-on-quarter (q-o-q) in the third quarter of 2025 to KRW3,447.4 trillion, supported by expansion in both the government and corporate bond segments. Outstanding government bonds rose 3.0% q-o-q due to an increase in government borrowing to fund the second supplementary budget approved in July 2025. Corporate bonds outstanding rose 2.0% q-o-q, despite a marginal contraction in issuance, due to fewer maturities during the quarter. Total LCY bond issuance gained 3.5% q-o-q to reach KRW287.2 trillion, driven by increased issuance of government and central bank bonds.

Sustainable Bond Market

The Republic of Korea's sustainable bond market posted marginal growth of 0.3% q-o-q in the third quarter of 2025 to reach a size of USD185.7 billion at the end of September. Overall growth was weighed down by a 30.4% q-o-q contraction in issuance during the quarter. Social bonds and green bonds continued to dominate the sustainable bond market with shares of 54.8% and 28.4%, respectively. Both public and private institutions are active issuers of sustainable bonds, with almost equal shares of the market.